The Power of Deals - Groupon business case exposed

Booz & Company This document and its analysis are property of Booz&Co. Use of any information should clearly reference its authors. The Power of Online Deals A Perspective on Group deals Amsterdam, 26 January 2011

Inform about the development of a new €Bn industry Provide an overview of the market & its players Future Outlook - where is this heading? OBJECTIVES

Imagine… ,[object Object],Andrew Mason December 2006 November 2008 April 2010 November 2010 December 2010 Timeline Born in ‘81 Andreessen Horowitz, Battery Ventures, DST,Greylock Partners, Kleiner Perkins Caufield & Byers, Maverick Capital, Silver Lake andTechnology Crossover Ventures. What is going on here? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],2012

The process is simple: Groupon has unlocked a local ‘dealvertising’ model 1. Deal Provision 2. Deal Creation 3. Deal Activation 4. Customer Conversion 5. Social Interaction 6. Coupon Redemption Dealvertising conversion cycle (Groupon Example) offline online Deals + Advertising = Dealvertising ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: DealVertiser© 2010

The key value lies in the ~50%* commission for Groupon, and ‘no cure, no pay’ customer acquisition for the merchant Amsterdam Deal example January 25 th , 2011 * Approximation, based on interviews with Groupon customers

The key value lies in the ~50% commission for Groupon, and ‘no cure, no pay’ customer acquisition for the merchant Groupon Cost/Benefit ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Merchant Cost/Benefit ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Groupon & Merchant Value Amsterdam Deal example January 25 th , 2011 1) assuming a 5% retention rate after 1 st visit

The addressable market is huge ($133Bn in US alone) which is why big players are following the bucks ,[object Object],[object Object]

The addressable market is huge ($133Bn in US alone) which is why big players are following the bucks ,[object Object],[object Object],[object Object],[object Object],[object Object]

The addressable market is huge ($133Bn in US alone) which is why big players are following the bucks ,[object Object],[object Object],[object Object],[object Object]

Also in the Dutch market more and more companies are entering the dealvertising space Launch date Rev/Month* Company MyCityDeal - March 2010 Groupon - May 2010 Groupdeal - April 2010 TMG - May 2010 Jan 2011 Jan 2011 Jan 2011 * estimate Source: Booz&Company Analysis € 1.5-€2Mn € 100-€150k < €10k < €50k < €50k

Primary focus of deals is on Dining and Health & Beauty services… 0 % of Deals per Segment Groupon Amsterdam main deals Jun-Dec (194 total) Fashion Nightlife 4% 3% Activities 12% Other Retail/Services 1% 3% Health & Beauty 35% Events/culture 1% Dining 42% Online Source: DealVertiser Analysis

… with highest absolute discounts in health & beauty and retail services f Coupon Price Coupon Value Activities Other Retail/Services Health & Beauty Online Dining Fashion Events/culture Nightlife Average Coupon Value & Price per Segment Groupon Amsterdam main deals Jun-Dec (194 total) € 84 € 71 € 39 € 28 € 24 € 20 € 17 € 8 Avg. Discount Source: DealVertiser Analysis

The current deal models are far from mature and will continue to rapidly evolve Marketing Customers Sales Deal Sourcing Operations From To ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Technology ,[object Object],[object Object],[object Object],[object Object]

Consumer behaviour is already changing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Groupon Effectiveness Study, Sept 2010; Dutch customer behaviour study My city Deal

As local, social & mobile are converging, large companies gain easier access to new marketing & sales opportunities Dealvertising SweetSpot ,[object Object],[object Object],[object Object],[object Object],[object Object],Examples of usecases Source: DealVertiser Analysis 2011 Local Groupon Facebook Social Mobile

Going forward we anticipate further sophistication of local targeting: getting you the most relevant deal at the right time Example: Yahoo’s “deal” mobile ads

Next steps are up to you… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

If you are serious about online value creation, contact us. We help our clients think about the strategy and tactics to win in the space ,[object Object],[object Object],[object Object],[object Object],Coen de Vuijst Vice President Amsterdam [email_address] ,[object Object],[object Object],[object Object],[object Object],Tamara Obradov Associate Amsterdam [email_address] ,[object Object],[object Object],[object Object],[object Object],Robbert Huisman Associate Amsterdam [email_address]

The Power of Deals - Groupon business case exposed

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